Thousands of permanently disabled military veterans in North Carolina could benefit from a push to make forgiveness of their student loan debt automatic.
“Military service members and their families sacrifice immensely in service to our country,” N.C. Attorney General Josh Stein said in a statement he released May 24, announcing that he was part of a bipartisan group of 51 state and territorial attorneys general asking U.S. Education Secretary Betsy DeVos to implement automatic loan forgiveness.
“It’s unjust that (veterans) should return home unable to work again as a result of their injuries and be saddled with staggering debt and an unsure financial future,” Stein said. “The (Department of Education) should give these service members the student loan relief they need to have a fresh start.”
Although the 2008 High Education Opportunity Act legally obligated the Department of Education to discharge the loans of veterans with 100 percent disability as a result of their service, the application process has resulted in only a small number getting this relief.
According to the N.C. Department of Justice, as of April 2018, only 9,000 veterans nationally have applied for the program, despite more than 25,000 defaulting on student loans.
Vet didn’t think he qualified
Retired Army National Guard Sgt. Mark Green of Fayetteville, who served in Iraq and with the Kosovo peace-keeping force, has been classified as permanently disabled. He told Carolina Public Press that automatic loan forgiveness would have made an important difference to him.
“I spent two years at the Warrior Transition Battalion at Fort Bragg before I was medically retired,” Green said. “I was in a whole new world, and coming to terms with any level of disability is not easy for anyone trained to never accept defeat or failure.”
The Department of Education did contact him about his eligibility for the total permanent disability discharge of his student loans. But based on the complicated information he reviewed, he didn’t think he met the criteria and chose not to sign the forms to apply.
“I read over the paperwork,” he said. “And because of the way I read the paperwork and the way I was still trying to come to terms with where I was at with myself, I wasn’t sure I actually qualified and didn’t apply.”
Green has since learned more about the program for which he was told he’d been preapproved. But the way the process worked and the situation he faced at the time he was invited to participate kept him from receiving the intended debt relief.
“How much stress will be lifted from those already struggling in these situations, looking to move into a new chapter of their lives, if the Department of Education simply starts approving what they are already preapproving?” he said.
“How many people think they won’t actually get approved if they apply? How many people are too concerned with their medical problems to think about another application process?”
In light of these concerns, Green called making loan forgiveness automatic an “excellent idea.”
“For many of us, we are paying off these loans and have the intention to pay off these loans, before we are put in a life-altering situation that leaves a burden on our shoulders that is hard to bear,” he said.
Impact in North Carolina veterans
“We do not have data on the number of North Carolina residents who are ‘disabled veterans,’” the U.S. Department of Veterans Affairs told CPP.
However, the VA’s fiscal year 2018 Annual Benefits report identified 203,292 veterans residing in North Carolina who received VA disability compensation as of Sept. 30, though not all of them had permanent and total disabilities.
The VA also does not have comprehensive data on how many veterans have student loans. However, the agency does track those using the GI Bill for educational expenses, including 33,265 North Carolina veterans, 20,291 of whom are post-9/11 students. The VA had no data on how many of those students are also disabled.
Regardless of the numbers, the proposed automation of the discharge process is popular among veterans and advocacy groups.
Retired Army Special Forces Master Sgt. William B. Tate III, a Vietnam veteran who served 30 years in the military and commands the Greensboro chapter of Disabled American Veterans, strongly supports making loan forgiveness automatic.
“Veterans need help in any way they can get it,” Tate said. “If a veteran has a job making $40,000-$30,000 a year, it’s hard for them to be giving all that money back over to their education.”
Problems with the current loan discharge system
“If a student borrower … dies or becomes permanently and totally disabled … the Secretary shall discharge the borrower’s liability on the loan by repaying the amount owed on the loan,” said the 2008 Higher Education Opportunity Act.
But in practice, qualified veterans not applying for the loan forgiveness has blunted the scope of the program.
According to an April 2018 estimate from the Department of Education, disabled veterans who are eligible for loan forgiveness owed more than $1 billion in combined debt.
In writing to DeVos, the attorneys general, including Stein, faulted the creation of a complicated process for a group of people who by definition are struggling with debilitating injuries: “The requirements imposed by the Department may prove insurmountable obstacles to relief for many eligible veterans due to the severe nature of their disabilities.”
The attorneys general argued that this system prevents veterans with severe disabilities from filling out and returning the necessary forms.
Solutions to the current system
Making the loan discharges automatic would require the creation of a new process, which would take time. The attorneys general have suggested that the Department of Education should pause debt collection efforts and clear any negative credit reports related to student loans while the automatic forgiveness system is being implemented.
Since the attorneys general wrote to DeVos, the Department of Education has pushed back on the idea of automatic loan forgiveness, claiming that it could cause increased tax liability in some states.
The attorneys general have dismissed this criticism, noting that federal tax law excludes loan discharges from taxable income.
They have also suggested an opt-out option for any veterans who object to having their debts forgiven for personal reasons.